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How to Compute FTP Rate Based on Forward Rate Computation From Spot IRC? (Doc ID 2692778.1)

Last updated on JULY 23, 2020

Applies to:

Oracle Financial Services Funds Transfer Pricing - Version 8.0.7 and later
Information in this document applies to any platform.
Oracle Financial Services Analytical Applications (OFSAA)
Oracle Financial Services Funds Transfer Pricing (FTP)
Oracle Financial Services Enterprise Performance Management (EPM)


How to compute FTP rate based on Forward Rate computation from Spot IRC?

Requirement is to calculate as follows:
Base TP Calculation = 55% of Total Outstanding * Spot rate (Yield Curve for Complete Term 1Y) + 45% of Total Outstanding * Forward Rate (4M, Term 6M)

Forward rate to be computed based on Bootstrapping method, to calculate transfer pricing based on Behavioral parameters.
The methodology adopted is to derive TP rates based on combination of Spot rate and Forward rate.
Forward rate refers to the 4 months forward rate that is 6 months from now. Like for simple bootstrapping whereby calculate the forward rates at each repricing term.
Further in example, say any account gets repriced every 3 months. For first repricing from today, get the rates from Spot IRC. But what will be the 3 months rate 3 months down the line, this is where forward rate functionality is used and what is actually desired here.


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